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Sugar mills in Maharashtra unable to cash in on price rise amid problems of liquidity

Despite rising sugar prices, Maharashtra mills struggle due to liquidity issues, selling at ₹38,000/tonne versus ₹40,000 in Uttar Pradesh. UP mills, with better financial access, benefit more. Lower production due to early flowering and red rot raises concerns over the 10 lakh tonne export quota. Experts warn of a liquidity crisis next season if mills fail to plan ahead.

Despite the rise in sugar prices in the domestic market, sugar mills in Maharashtra are not able to benefit from it even as their counterparts in Uttar Pradesh are able to sell sugar at a premium price.

While the mills in Uttar Pradesh are commanding prices of Rs 40,000 per tonne for their sugar, those in Maharashtra are only able to get Rs 38,000 per tonne for their produce.

The main reason for the difference in prices between the two states is the weaker financial condition of the sugar mills in Maharashtra in terms of liquidity.

Most mills in the state have to depend on loans either from banks or from traders to meet their need for liquid cash in terms of payment to the transport and harvesters and other operational costs.

Mills in Uttar Pradesh are better off, in terms of liquidity as most mills being public limited companies have access to market capital. Most mills in Maharashtra pledge their sugar to traders well before the season which are considerably lower than the spot or current prices.

Fear of lower production both in Uttar Pradesh and Maharashtra has seen sugar prices increase in the domestic markets. On Saturday, the National Federation of Cooperative Sugar in its estimate said that the total production of sugar would be 270 lakh tones (lt). This is around 10-15 per cent lesser than the initial estimates as early flowering of the crop in Maharashtra and red rot infestation in Uttar Pradesh has turned the tide against the industry.

As production takes a hit questions are being raised about whether the 10 lt sugar export quota would materialise.

Dilip Patil, managing director of Karmayogi Ankushrao Tope Cooperative Sugar Factory in Jalna said exports would be feasible.

“At present mills are signing export contracts at the average rate of Rs 45.000 per tonne which is higher than the domestic markets. We must see that the next season — 2025-26 — would be a bumper season,” he said.

Patil said his own mill as per the initial calculation would have 20,000 hectares of excess crop. “If mills do not plan in advance, the liquidity crisis will be serious in the next season,” he said.

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Source : The Indian Express

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